Consider the Inter-temporal Model with two time periods, t=0 and t=1.

Home is a small open economy that can borrow and lend in the first period at the world real interest rate of 5%.

In the first period, output is Y_o = 100 and in the second period Y₁ = 100. The country wants to smooth consumption as much as possible.

The country ended period t=-1 with positive external assets, W_-1 = 50.

True or False, Explain

In present value over t=0 and t=1, the country will run a current account deficit.